Lincare bulks up before bid expansion

CLEARWATER, Fla. - The acquisition of American HomePatient better positions Lincare to move forward as Medicare implements nationwide reimbursement cuts, say industry analysts.

The agency plans to apply competitive bid pricing to non-bid areas on Jan. 1, sweeping the country with large reimbursement cuts.

“They'll be able to to cover more geography and service more patients,” said Patrick Clifford, managing director, home medical equipment, for The Braff Group.

The deal between the two companies has been rumored for months, with AHP reportedly on the market since 2014.

The marriage between Lincare and AHP looks especially good on paper, analysts say.

“They basically replaced all of the revenue that they were going to lose in the first six months of the year (due to the cuts) and they will probably improve their profitability by the time they work through their synergies,” said one analyst.

Lincare's increased scale might also come into play with managed care and accountable care organizations, analysts say.

“Lincare will be in a better position to negotiate that contract,” said Clifford. “With a larger footprint, they can serve that population.”

The transaction is expected to close in the first quarter of 2016 and analysts predict Lincare will work quickly to combine revenues and operations, and reduce overlap. Lincare has approximately 1,000 locations across the U.S. compared to AHP's 220.

“Their goal is going to be to come out of this thing with as close to the same amount of locations as they did when they started,” said Rick Glass, president of Steven Richards & Associates.